A disturbing litigation trend over the last ten years has been the rise in nuclear verdicts, which are jury awards that surpass $10 million.
Of verdicts more than $1 million, the average increased nearly 1,000 percent from 2010 to 2018 — from $2.3 million to $22.3 million. In 2019 alone, there was a 300 percent increase in verdicts of $20 million or more when compared to the average from 2001 to 2010.
The internet is filled with recent nuclear verdicts, and professional say they will continue to increase.
In July 2021 in Boone County, a jury awarded a verdict of $74 million in a single death case that involved a motor vehicle accident. The plaintiffs sued Eaton Construction, a paving company after a driver of a medium-sized truck lost control of his vehicle. Its tires dropped off the roadway, which caused the truck to strike the decedent’s car, resulting in her death. This stretch of highway was being resurfaced by Eaton, and the asphalt was not milled down properly, nor were there proper safety barriers in place until the milling was completed.
The problem is that business owners and establishments, simply can’t afford to carry $74B in limits on their insurance coverages, or even on their umbrella policies. In fact, I only know of a handful who carry more than $20M in limits and re-insurance.
If a plaintiff wins a $20M verdict from a jury, and if the business being held liable only carried $5M in limits, then the business owner would be on the hook for the next $15M and would more than likely be forced to close their doors.
There has been a clear trend of inflated verdicts over the past few years, and they are here to stay.
Several industry types and social factors are contributing to the increase in litigation and class action lawsuits.
There are a variety of reasons for these nuclear verdicts and one of them is social inflation, which is described as the rising cost of insurance claims resulting from things like increasing litigation, broader definitions of liability, more plaintiff-friendly legal decisions, and larger compensatory jury awards and it is not tied to price inflation.
Social inflation is driven by pervasive negative feelings in society today which causes corporate mistrust.
Where there is a lack of public faith in corporations and their responsibilities (i.e., safety) to society and the community is likely playing a role leading to juries to feel more sympathy for injured plaintiffs — and wanting to punish the offending companies.
Growing social pessimism and jury sentiment favoring the plaintiffs. This attitude can lead juries to be biased toward the rights of plaintiffs, thinking businesses should bear a greater share of responsibility than individuals.
Another cause for social inflation is that jury demographics have changed. More millennials are in the jury pool than baby boomers. Millennials value experiences rather than dedication to work and careers, and they demand far more perks from their employers. Millennials often have a different cultural context for evaluating corporate conduct than baby boomer and generation X jurors. They have shorter attention spans; less attention to complex defenses, which has forced defense attorneys to change their defensive approach and expert witnesses.
Millennials, having grown up in a highly safety-protected environment, understand the notions of “victimization” and “vulnerability” differently than previous generations. Their consumer-protection expectations for corporate behavior may therefore be enormous relative to older generations.
Millennials believe that corporations should take every precaution for safety, no matter how practical or costly.
Jury awards are higher in areas with greater levels of income inequality exist. In one study, income inequality explains up to 40% of the observed nuclear verdict outcomes in a jurisdiction, with each additional percentage in the poverty rate translating to a 6% increase in the median damage award.
However, income inequality does not predict the likelihood of plaintiffs winning a case, only the size of the award.
The fact is jurors today are increasingly numb to high dollar figures as they are increasingly aware of massive legislation (COVID Relief Bill – $1.9T, Reconciliation Bill – $3.5T), big lottery payouts, sports salaries, CEO salaries, etc. Personal injury lawyers are normalizing extreme verdicts through relentless multimedia advertising, which desensitizes jurors to the value of the dollar when giving awards.
But then the biggest cause for social inflation and nuclear verdicts is the plaintiff attorney’s approach, as today as they are implementing the “Reptile Theory.” Such an approach appeals to jurors’ “reptile” brain, said to be the part of the brain that controls the fight or flight response. This approach is a trial strategy that attempts to use fear and anger to make the jury dislike the defendant so strongly they will award a plaintiff a just award.
The plaintiff’s attorney will seek to activate the jurors’ “survival mode” instincts by presenting the defendant’s conduct as highly dangerous and worthy of punishment. The defendant’s conduct will be portrayed as a threat to the safety of the public, and the award as a deterrent needed to protect the community at large. The reptile theory appeals to the jurors’ emotions in place of any rational, impartial evaluation of the evidence. It plays on fear where they try to prove that this type of accident could happen to me, my family or someone in my community and motivates them to protect the vulnerable. They then attack the plaintiff’s character all while downplaying any of the plaintiff’s mistakes.
Defense attorneys are now going on the offensive as well, as they try to appeal to the younger millennial generation jury pool by employing videos, animations, graphics, and virtual reenactments of an accident scene as part of the defense. They are having to come better prepared to defend and counter against the reptile approach by creating a trial theme, establishing an anchor by establishing the overall value of the claim in the medical costs, and trying to avoid inflaming the jury.
Defense attorneys try to establish that the defendant’s conduct was reasonable, that safety rules are almost never simple or absolute, and that not every unforeseeable accident can be prevented. They also try to convince the jury that sometimes, someone doesn't always be held accountable when an accident happens.
Accidents and negligence have been a part of our society and 100 years from now they still will be, and these cases will continue to be litigated in our courtrooms. As a risk management and safety professional, that’s where I come into the equation.
Businesses need to go on the offensive to counter the growing insurance premiums because of these nuclear verdicts. Premiums are going to continue to go up and to remain at the bottom of that band of increases, safety must be one of your top priorities.
When underwriting your insurance policies, underwriters for your commercial carriers need to be able to see that you’re not just reacting to your risk exposures, but you are in a proactive stance, going above and beyond to control your exposures. Being able to show documentation for proactive safety training, preventative maintenance records, spending receipts, risk control decisions, …etc. is a must, and will you defend such claims to avoid becoming a nuclear verdict.
Businesses must avoid taking shortcuts when it comes to safety, which can later be defined as negligence in a courtroom 4 years later. Reach out to your insurance carriers or insurance agent and get them involved in your risk control efforts to reduce your liabilities and chances for a nuclear verdict that could put you out of business.
Social inflation introduces a level of uncertainty when it comes to your risk management and claims prevention practices. To ensure your business is ready for any issue that may arise, it’s vital to have a competent insurance professional advising your business. Be sure to partner with a broker who has strong carrier relationships, knowledge of your industry, and can provide you good sound safety and risk control advice.
Be Safe My Friends.
